Megawati Soekarnoputri, eldest daughter of Indonesia’s founding president, Soekarno, was sworn in as president on 23 July 2001 after the dismissal of her predecessor, President Abdurrahman Wahid. The new government faces daunting challenges in almost every field. The economy has yet to recover from the financial collapse of 1997-98; territorial integrity is threatened by an active insurgency in Aceh and a potential insurgency in Irian Jaya; radical decentralisation has shaken up government structures but is not working well; ethnic and religious violence is commonplace; the bureaucracy and legal system continue to be riddled with massive corruption and require extensive reform; and popular confidence in Indonesia’s fledgling democracy is fading. The overall mood continues to be pessimistic.

Although the outlook is still dim, the installation of Megawati as president was greeted with relief by the Indonesian public which had become alienated by Wahid’s erratic and ineffectual leadership. The feared social conflict and national disintegration of which Wahid had often warned did not happen and the nation more or less returned to normal after his fall. However, beyond her nationalist rhetoric, Megawati had given little indication of the policy directions her government would take. Her announcement of her government’s six-point working program, on the day that she appointed her cabinet, provided only the broadest of guidelines. The six points are:

Her cabinet choices, her emollient remarks to the people of Aceh and Irian Jaya, her warning that her family should avoid corruption and her statement of clear priorities are all good signals. But there are concerns that her government may prove unwilling or unable to follow through with the reforms that Indonesia needs, instead preferring incremental steps that do little to remedy the problems. Megawati now needs to move rapidly beyond symbolism to the implementation of clear policies on the economy, security and judicial reform.

Her choices for ministers have been mostly praised. She has chosen technocrats for the top economic jobs and has generally favoured policy professionals over party politicians. Her choices for two key coordinating ministers – former academic and ambassador Dorodjatun Kuntjorojakti to run the economy and General Susilo Bambang Yudhoyono in charge of security – have met with cautious approval. Both are sophisticated actors on the political stage in Indonesia but they face key challenges that require swift and decisive management. Dorodjatun must handle the demands of the IMF and international investors that Indonesia privatise assets taken over after the economic collapse in 1997 and overcome obstacles placed in way both by corrupt former owners and an increasingly nationalist parliament. Indonesian governments have shown skill in the past at macro economic management but what is now needed is a deft handling of micro-economic reforms.

As Coordinating Minister for Political and Security Affairs, Bambang Yudhoyono faces a pressing situation in the rebellious province of Aceh. To defuse demands for independence, the government needs to move quickly to end human rights abuses and implement a special autonomy package. Reform of the military, including a reduction in their role in government across the archipelago and radical changes to the way it is financed, will test Yudhoyono’s credentials as not only a reformer but as a decisive manager.

While Megawati has won praise for steering clear of officials with a reputation for corruption, her delayed choice for Attorney General has injected a note of real concern. M.A. Rahman is a little known career prosecutor who has spent 35 years in the notoriously corrupt Attorney General’s Office. The appointment has signalled that Megawati may not take the robust steps against corruption that Indonesia desperately needs. It has also led to anxieties about the lingering influence of those military leaders who are determined to avoid prosecution for their role in human rights abuses in East Timor and elsewhere. Rahman was earlier responsible for a limp investigation into abuses in East Timor. He is seen as an unlikely figure to take on the corruption that in recent years has spread from the centre of power and become ubiquitous and unpredictable.